Lenovo aims to capitalise on the x86 server products it acquired from IBM by consolidating product sales under one channel. It sounds good in theory, but Lenovo has more challenges to its server ambitions than its channel structure
Lenovo is looking eagerly to make the most of the x86 server assets it acquired from IBM by consolidating the new products into an overall channel programme with its PC business. The challenge isn't so much the single programme, but what faces Lenovo solution providers in the field.
In September, Lenovo closed its $2.1bn (£1.3bn) deal with IBM to acquire its x86 server business units, along with its Power server and management tools. Coming with the deal are thousands of IBM employees and solution providers that continue to sell and support the entry-level and mid-tier server business.
IBM opted to sell the unit which is underperforming compared to the rest of its business and shrinking in market share. Lenovo, which has a track record for turning other company's distressed assets into gold, picked up the server unit to expand its business portfolio beyond PCs and tablets.
In an interview with eWeek, Lenovo's channel chief Chris Frey has outlined ambitions to make the most of the new server assets to complement its organic server products. The catalyst, he says, is Lenovo's highly productive channel, which will have the opportunity to sell the entire portfolio through a single channel programme with a consistent compensation framework.
"We want partners to look at us as a company that can build tablets and PCs and data center [products] and [solutions for] the cloud," Frey was quoted as saying.
Frey and Lenovo may be learning from history that divided channels rarely work well. By not quickly consolidating product-oriented channels - particularly supporting products that have such complementary attributes as servers and PCs - vendors in similar acquisitions have often struggled to reap the rewards of their purchases.
Moreover, solution providers often become frustrated by inconsistencies in parallel channel programmes.
Through rapid consolidation, Lenovo is looking to strike while the deal is hot. With IBM effectively out of the x86 server market, Lenovo can concentrate on competing against rivals HP and Dell for market share and channel mind share.
With a low barrier to entry, no certification requirements and a clear path to profitability, Lenovo believes it can race to the top of the server market the way it did with PCs.
However, the market looks different today from when Lenovo and IBM began the server-sale talks. In that time, Dell has gone private and found new footing in the market. And HP announced a breakup that will put its PC and server businesses into separate companies.
While there's opportunity amid this change, Lenovo doesn't necessarily have the same path forward that it saw in 2013.
Although Lenovo has a good and uncomplicated channel programme, it lacks the technical certifications and architectures that HP and Dell provide their partners. And while Lenovo wants to position its servers as part of a broader cloud and mobility solution sold through partners, it lacks many of the complementary datacentre products that Dell and HP can offer.
HP and Dell have been aggressive in recruiting IBM partners from the Lenovo migration.
The hand-off by IBM isn't as clean as it appears either. While thousands of IBM partners will follow the servers to Lenovo, a large number will not. IBM made it clear when the acquisition was announced in January that it sees greater opportunity in its SoftLayer cloud business, and believes hosted infrastructure is the future.
In that regard, IBM intended to keep a certain number of its x86 server resellers to push its cloud products.
Lenovo is confident that its success in reviving PC sales can translate to servers. As Frey said in eWeek: "We want to train them so they can recommend us."
Some might ask whether the portfolio approach is still valid. While PCs and servers are complementary technologies, they're commodity products often bought by two different buyers for different reasons.
Part of the reason HP is breaking up is because the PC business doesn't cleanly map to the server business. Thus Lenovo will aim to get PC resellers to support servers and server resellers to sell PCs without disrupting legacy business.
Beyond its rewarding channel programme, Lenovo has extended relationships with complementary technology vendors that can help create datacentre-to-endpoint solutions. Lenovo's challenge, though, is pooling those extended resources effectively to compete against HP and Dell and their broader portfolios.
While competitors will question Lenovo's ability and the market opportunity, Lenovo has proven time and again that it can do what others deem impossible.
Larry Walsh is chief analyst and president of the 2112 Group
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